The US economy slowed in July after surprising to the upside in May and June as it bounced back from its low in April. St Louis Fed president James Bullard said Monday.
Bullard, in webinar remarks at an event hosted by the St Louis Fed’s Memphis branch, repeated that he expects the economy to stabilise from the Covid-19 shock by the end of the year, but that he sees “ups and downs” for the economy as everyone figures out how to adjust to a disease that is not going away.
Keeping the economy shut down while awaiting a vaccine would precipitate a depression, Bullard said. Instead, the private sector must take mitigation steps, like enforcing social distancing and mask wearing, to allow employees and customers to be relatively safe re-engaging in commerce, he said.
Covid-19 poses a mortality risk similar to many other activities the economy manages, such as driving automobiles, where wearing seatbelts helps limit accidental death, Bullard said. The economy is adjusting to this new risk, which is persisting longer than expected as the pandemic took hold earlier in the year, he said.
Businesses are “learning day by day” how to limit risk by using simple, available technologies, Bullard said. Manufacturers have a leg up in making this adjustment, given that they are accustomed to “operating within a rule-based world” to ensure safety, he said.
Monday’s Institute for Supply Management report shows manufacturing running “at a high level”, Bullard said. On the other hand, service businesses that require more interaction with customers will have a tougher time adjusting to the new reality, he said.
Bullard said third-quarter US GDP growth figures would be their strongest since WWII. “There are many ways things could unravel,” depending on the course of the virus, but the economy should stabilise by year end, he said.